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Increased Access to Capital for Indian Country in Proposed Regulations for Community Reinvestment Act Modernization

December 12, 2019

On Thursday, December 12, the Office of the Comptroller of Currency (OCC) and the Federal Insurance Deposit Corporation (FDIC) released a proposal to modernize the Community Reinvestment Act (CRA) with an increased focus on promoting capital and investment in Indian Country.

These proposed regulations are historic for Indian Country in a few key ways. They provide tribal governments parity with other governments to determine the financial needs of their respective communities. They also encourage innovative partnerships between Indian Country and financial institutions to support community revitalization and development.

Increasing tribal access to banking services and credit will help finance community development by making more funding available for economic development, public safety, housing, infrastructure, and education. These proposed improvements to the CRA could provide long-term funding for tribal governments and secure access to capital to help tribes sustain thriving communities.

The main objectives of the modernization effort are:

Clarifying what counts for CRA credit: The proposal would clarify what qualifies for CRA credit by requiring regulators to develop, publish, and maintain a publicly available list of pre-approved CRA activities. The list would be illustrative, not exhaustive, and will be updated regularly. The proposal would establish a process for stakeholders to submit additional items for inclusion on the list.

The proposed list of activities that count for CRA credit includes many activities that are specifically aimed at spurring investment in Indian Country.

Updating where bank activity counts: The proposal would help reduce CRA deserts and hotspots by clarifying when banks can receive credit outside their CRA assessment areas, requiring banks to designate additional assessment areas where they have concentrations of deposits outside their facility-based assessment areas, and providing banks more flexibility to serve areas with identified needs, including in low- and moderate-income census tracts, distressed areas, underserved areas, and Indian country.

Banks will get CRA credit for serving Indian Country even if Indian Country is not part of their assessment area.

Measuring CRA Performance More Objectively: The proposal would measure CRA performance more objectively by assessing the distribution and the impact of a bank’s CRA activity. The proposal would require examiners to assess what portion of a bank’s retail lending is targeted to low- and moderate-income individuals and areas within their assessment areas and to evaluate the impact of that activity by comparing the ratio of the value of all of a bank’s CRA activity (lending, investment, and services) divided by its retail deposits to an objective benchmark in each assessment area and at the overall bank level.

Banks will receive a multiplier (i.e. boosted score) for conducting CRA activities within Indian Country.

“The proposal to strengthen and modernize the regulations implementing the Community Reinvestment Act would help encourage banks to lend and invest more in Indian Country by clarifying for the first time that banks will receive CRA credit for such activity even if it falls outside of their assessment areas. This change is just one of the many ways the new rules would promote more lending and investment in the communities banks serve, including low- and moderate-income areas as well as distressed urban and rural areas. I appreciate the input provided by NAFOA and many other stakeholders that helped inform this proposal. Now, I encourage all stakeholders to read the proposal and provide their comments so that we can make the final rule the strongest it can be.”

— Joseph Otting, Comptroller of the Currency

CRA Background

The CRA was enacted in 1977 to address “redlining,” a practice where banks would deny credit to individuals based on where they live. The law requires the federal banking regulators to assess each depository institution’s record of helping meet the credit needs of the low and moderate income communities it is chartered to serve. Despite the need in Indian Country for investments the CRA could provide, the Act has done little to help Indian Country since its enactment.

Over the past year the OCC has prioritized modernizing the CRA’s regulations so it can better serve communities, like Indian Country, that have been left behind. The OCC has solicited comments and participated in community tours to help determine where the CRA is falling short.

In August 2019, NAFOA and the OCC hosted a bus tour of pueblo communities in New Mexico as well as a community discussion with a group of tribal economic development stakeholders from the government, private, and non-profit sectors. The tour provided a unique opportunity to share ideas and expertise regarding the importance of a modernized CRA that would better serve the financial needs of tribal governments and citizens.

"While regulatory updates don’t often inspire the imagination, these proposed rules should. These proposed regulations create a channel to access capital and address our communities’ most critical needs in a more consistent and robust manner. NAFOA is grateful that the OCC and the FDIC have listened to the unique banking needs of native communities, we look forward to continuing our strong partnership to strengthen and grow tribal economies across the nation."

— Tina Danforth, President, NAFOA

NAFOA will continue to work with the OCC, FDIC, and stakeholders across Indian Country as the final rule is developed. For questions or concerns, please contact Dante Desiderio at Dante@nafoa.org or (202) 631-2003.